The mouse mammary tumor virus (MMTV) has emerged as the leading model system for the study of gene regulation by steroids at the transcriptional level. We have established that the glucocorticoid responsive regulatory element (HRE) for the MMTV promoter is completely encoded within the long terminal repeat (LTR) of the virus. The v-ras-H gene of Harvey murine sarcoma virus (HaMuSV) was fused to the complete MMTV-LTR promoter. After introduction of this chimeric DNA into NIH 3T3 cells, steady state levels of p21 protein (the product of the v-ras-H gene) were responsive to regulation by glucocorticoids. Subsequently, we found that the MMTV promoter is subject to strong activation by an enhancer element derived from the U3 region of the HaMuSV, both in transfection efficiency of LTR-v-ras-H fusion genes, and in transient expression of LTR-chloramphenicol acetyltransferase fusion genes. We discovered that although the activity of the LTR is highly stimulated in the presence of glucocorticoids, the enhancer does not efficiently activate transcription from the LTR when glucocorticoids are not present in the tissue culture medium. In fact, transformation efficiency by the linked v-ras-H gene is depressed compared to that obtained with the activating element driving transcription from a nonregulated promoter. Functional analysis of LTR deletion mutations assayed both in a focus-forming assay or transient assay with CAT fusion genes have localized the sequences required for the hormonal response. Furthermore, mutations which abolish hormone responsiveness also destroy the negative influence which the intact LTR exerts on transcriptional activation by the upstream enhancer. Finally, experiments utilizing episomally mobilized MMTV LTR fusion genes have established that a labile protein is responsible for mediating the negative modulation of enhancer activity that we have observed, and further that it mediates its activity by interaction with sequences closely associated with the hormone regulatory element of the LTR.